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PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by assessee u/s 253 of the Income-Tax Act (“The Act”) is directed against the order of ld. CIT(A)-26, Mumbai dated 16.06.2014 for Assessment Year (AY) 2007-08. The assessee has raised the following grounds of appeal:
A) On the facts and in the circumstances of the case, the Honourable Commissioner of Income Tax (A) erred in law and on facts in confirming the levy of penalty u/s 271 (1) (c) of the I.T. Act for A.Y. 2007-08. B) In the facts and circumstances of the case, the Hon'ble Commissioner of Income Tax (A) should not have confirmed the penalty levied u/s 271 (1) (c) of the I.T. Act by the learned Assistant Commissioner of Income Tax; 15(3), Mumbai.
- M/s Swastik Realtors C) The Appellant submits that the penalty levied by the learned Assistant commissioner and confirmed by the Hon'ble Commissioner of Income Tax (A) 26 is against the principles of natural justice and is bad in law. D) The Appellant prays the Honourable members to delete the penalty levied u/s 271(1) (c) of the I.T. Act, by Assistant Commissioner and confirmed by the Honourable Commissioner of Income Tax (A) 26, Mumbai.
Brief facts of the case are that the assessee filed its return of income for relevant AY on 26.10.2007. The assessment was completed on 26.11.2009 u/s 143(3) of the Act. The Assessing Officer (AO) while passing the assessment order made the addition of Rs. 1.00 Crore on account of fictitious unsecured loan and Rs. 93,000/- on account of interest on such loan. On appeal before the ld. CIT(A) in quantum assessment, the addition of unsecured loan and consequential interest claim of Rs. 93,000/- was confirmed vide order dated 30.11.2011. After dismissal of appeal in quantum assessment, the AO issued a show-cause notice u/s 274 r.w.s.
271(1)(c) dated 31.01.2013. In response to the notice, the assessee filed its reply and contended that the assessee has filed appeal before the Tribunal and the matter may be kept till the disposal of appeal by Tribunal. It was further contended that the transaction of loan was taken through banking channel and the addition was made on the basis of assumptions. The assessee has proved the genuineness of loan and the penalty is not leviable on such disallowance. The contention of the assessee was not accepted by AO holding in the survey action u/s 133A at the premises of M/s Moxdiam, it was revealed that Moxdiam was including in providing accommodation entries. The appeal filed by assessee on the quantum assessment has been 2 M/s Swastik Realtors dismissed by ld. CIT(A). The AO levied the penalty @ 100% holding that the assessee has not only concealed the particular of income but has furnished inaccurate particular thereof. The AO levied the penalty of Rs. 33,97,304/-. On appeal before the ld. CIT(A), the penalty was confirmed.
Thus, further aggrieved by the order of ld. CIT(A), the present appeal is filed before us.
We have heard the ld. AR for the assessee and the ld DR for revenue and perused the record. The ld. AR for the assessee argued that the assessee made a bonafide claim of loan. The assessee furnished all the documentary evidences related with the transaction of loan. The assessee has proved the transaction of loan, transaction of loan was through RTGS or A/c payee claques. The assessee has filed confirmation of loan, copy of ledger account of lender, copy of bank statement for last three years, financial accounts, trading accounts, P/L accounts and the return of income. Merely treating the loan amount as income of the assessee by assessing officer would not automatically attract the penalty. On the other hand the ld. DR for the Revenue while making submissions supported the order of authorities below. The ld. DR for the Revenue argued that the assessee has availed accommodation entry of loan from the hawala entry provider. The assessee has shown a loan of Rs. 1.00 Crore from M/s Moxdiam. The investigation team of the department made a survey at the premises of Moxdiam under section 133A on 07.07.2008. M/s Moxdiam was a partnership firm managed 3 M/s Swastik Realtors by Sh. Nitesh Jain and Sh. Basant D Jain. In the said survey it was revealed that M/s Moxdiam was indulging in providing Hawala entry to various interested beneficiary in the market. It was further argued that the appeal against the quantum assessment has already been dismissed by CIT(A) on 30.11.2011.
We have considered the rival submission of parties and gone through the records of the case and the orders passed by lower authorities. The AO while framing the assessment made the disallowance of unsecured loan of Rs. 1.00 Crore and the interest payment of Rs. 93,000/-on the said loan. The AO disallowed the loan and its consequential interest on the basis of the survey conducted on 07.07.2008 under section 133A of the Act, at the premises of M/s Moxdiam. During the assessment the assessee filed documentary evidences related with the transaction of loan. The assessee has filed the evidences related with the transaction of loan, showing that transaction of loan was through RTGS or A/c payee claques. The assessee has filed confirmation of loan, copy of ledger account of lender, copy of bank statement for last three years, financial accounts, trading accounts, P/L accounts and the return of income of the lender. The AO instead of making any independent enquiry relied on the statement of partner of M/s Moxdiam allegedly recorded during the survey action and treated the unsecured loan as unexplained unsecured loan of Rs. 1,00,000/- (one Crore only) and also disallowed the interest of Rs. 93,000/-on such loan. The AO levied the 4 ITA No. 5087/M/2014- M/s Swastik Realtors penalty @100% of tax sought to be evaded. During the first appellate stage the assessee further filed additional evidence and claimed that the partner of M/s Moxdiam appeared before the AO in response to the notice under section 133(6) and confirmed the facts and the genuineness of the transaction. The assessee further submitted that the said unsecured loan was repaid by the assessee on 18.09.2008, 17.12.2008 on 20.03.2009 vide Cheque no 526402 for Rs.38,00,000/-, Cheque no 526403 for Rs.60,00,000/- both drawn on ICICI Bank and on 20.03.2009 by Cheque no.115328 of Rs. 7,03,498/- drawn on Thane Co-operative Bank. The assessee also submitted that Revenue has accepted the source and investment of lender i.e. M/s Moxdiam as genuine in the assessment order passed under section 143(3) rws 147, after the said survey action.
We have noted that the AO in para 7 of his order passed under section 271(1)( c) of while levying the penalty has referred that the Sh. Basant Jain partner of M/s Moxdiam appeared before him on 23/06/2011 in response to the notice under section 133(6) and filed details of loan transaction confirming the facts and the genuineness of the transaction. The AO further refereed in para 8 of his order that the said unsecured loan was claimed to have been repaid by the assessee on 18.09.2008, 17.12.2008 on 20.03.2009 vide Cheque no 526402 for Rs.38,00,000/- , Cheque no 526403 for Rs.60,00,000/- both drawn on ICICI Bank and on 20.03.2009 by Cheque no.115328 for Rs. 7,03,498/- drawn on Thane Co-operative Bank. One of 5 M/s Swastik Realtors the proprietor of Moxdiam Sh. Basant Jain has retracted the statement vide his affidavit dated 18.02.2011. The Affidavit of other partner of M/s Moxdiam Sh. Nitin Jain was also filed before AO. The AO not accepted the confirmation of the loan furnished by partner of M/s Moxdiam in the form of affidavit. The partner of M/s Moxdiam appeared in person to corroborate the facts. The AO instead of bringing any material on record relied on the information of the survey proceedings conducted on the premises of M/s Moxdiam. It is not in dispute that on appeal against the quantum assessment, the addition has been confirmed by ld CIT (A) in its order dated 30.11.2011. However, the penalty proceedings are separate and independent. In our view the assessee during the penalty proceeding and First appellate stage has prima facie has brought on record the evidences to establish the facts about the identity, creditworthiness of party and genuinity of the transaction of unsecured loan. The assessee has discharged his primary onus. The AO has not disputed the fact that the revenue has accepted that the investments / loan and advances and its source as genuine in the assessment order of lender i.e. M/s Moxdiam under section 143(3) rws 147 for AY 2007-08, which was passed after survey under section 133A.
The assessee throughout the proceedings claimed that all details and particulars were furnished and the assessment was framed on the basis those particulars, mere the claim of the assessee were not allowed, it does not 6 M/s Swastik Realtors amounts to furnishing of inaccurate particulars of income. We have seen that the disallowance was made only on the basis of material available on record. As per the contention of the assessee, the assessee has made bonafide claim. The claims of the assessee were not accepted by the assessing officer while passing the assessment order. It is settled law that mere disallowance of the claim would not automatically lead to levy of penalty unless the AO specified that the assessee has claimed wrong claim which was not admissible or claimed with malafide intention. In our view, the AO made the disallowance of unsecured loan and its interest payment on the basis of third party information. The AO levied the penalty holding that assessee has furnished inaccurate particulars of income. In our view, the inaccuracy of particular can be judged in accordance with the fact of the case. The Hon’ble Supreme Court in case of Reliance Petroproducts Pvt. Ltd. (322 ITR 158) held that mere making of claim which is not accepted by AO, would not automatically leads to levy of penalty. The Hon’ble Court further held that the words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c). We have noticed that there is no finding of the AO that the particulars furnished by assessee were found to be incorrect or erroneous. In 7 ITA No. 5087/M/2014- M/s Swastik Realtors view of the above discussion the order of levy of penalty under section 271(1) (c) is not sustainable and the same is set-aside and the penalty levied by AO is deleted.